VGSF - WU Vienna - LC

Thierry Foucault, HEC Paris

online via Microsoft Teams Live Events 11:00 - 12:00

Organizer VGSF

As part of the ser­ies of the "Fin­ance Re­search Sem­inar", VGSF wel­comes Th­i­erry Fou­cault from HEC Paris to present his re­search pa­per.
Per­sonal Webpage

Pa­per

Equi­lib­rium Data Min­ing and Data Abund­ance

We ana­lyze how in­form­a­tion pro­cessing power and data abund­ance af­fect spec­u­lat­ors’search for pre­dict­ors. Spec­u­lat­ors op­tim­ally search for a pre­dictor whose sig­nal-to-noise ra­tio­ex­ceeds an en­do­gen­ous threshold. Greater com­put­ing power raises this threshold, and there-­fore price in­form­at­ive­ness, be­cause it re­duces the cost of search. In con­trast, data abund­ancecan lower this threshold be­cause (i) it in­tens­i­fies com­pet­i­tion among spec­u­lat­ors, which re-­duces the be­ne­fit of find­ing a good pre­dictor and (ii) it in­creases the total ex­pec­ted cost offind­ing a pre­dictor. In the former (lat­ter) case, price in­form­at­ive­ness in­creases (de­creases)with data abund­ance. We present ad­di­tional test­able im­plic­a­tions of these ef­fects.



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